Shhh… The seller might be listening

Patrick Hubbard, a professor at the University of South Carolina School of Law who is working on a project titled “Privacy in an Era of Ubiquitous Disclosure and Surveillance,” has been searching for a new house.

But as he and his wife walked through sellers’ homes and discussed what they were willing to pay, the thought that a hidden device could be recording their conversations and movements never popped into his mind.

“Of course we had the expectation that we could talk,” he said. “Why not?”

The appellate courts in the Carolinas have yet to address Hubbard’s question, though it seems inevitable that a case will eventually crop up given the affordability and user-friendliness of home surveillance systems, nanny cams, baby monitors and other snooping gadgets.

It’s easier than ever for sellers to spy on potential buyers and collect information that could be leveraged during negotiations, creating a 21st century conundrum in the real estate world. The practice appears, at first glance, to run afoul of state and federal wiretapping laws, which require at least one party of a conversation to consent to their talk being recorded. But the legalities get murky when considering a potential buyer’s expectation of privacy in a seller’s home.

“It raises a really interesting legal issue,” said Jeffrey Welty, an associate professor of public law and government at the University of North Carolina School of Government in Chapel Hill. He was unable to find any case law on home sellers secretly recording buyers. But he cited a California decision which found that a babysitter had a reasonable expectation of privacy in another person’s house, though he said that the holding was based on the fact that the babysitter had control of the residence.

Welty added that multiple courts have held that maids, repairmen and other residential workers generally leave their reasonable expectation of privacy at the door when they enter a stranger’s house.

“My guess is that’s probably a little bit of a closer analogy and perhaps there would be no impediment for sellers recording buyers in this way,” he said. “If I were guessing how a North Carolina court would rule, I’d say that they’d rule that there’s no expectation of privacy when you’re in someone else’s house.”

Hubbard had a different view. He believed that the Palmetto State’s one-party consent law allowed buyers to sue sellers for violating their privacy by surreptitiously recording their conversations during showings.

Hubbard also cited the South Carolina Court of Appeals’ decision in 1989’s Snakenberg v. Hartford Casualty Insurance Co., which dealt with the scope of a type of invasion of privacy action known as “wrongful intrusion into private affairs.”

The court determined that a man who lured young women to his residence with newspaper ads seeking swimsuit models and then secretly recorded them changing before their photoshoots had “intruded into the private activities of the girls, causing them mental suffering, shame and humiliation.”

“There’s a good argument that if you had two spouses having a conversation about how much they’d be willing to pay … that they’re going to have an expectation that the other side they’re going to have to bargain with is not listening,” Hubbard said. “And thus I think you would have a claim under the state statute. You would also have a potential common law claim under the Snakenberg decision for intrusion into privacy.”

The South Carolina Real Estate Commission, which licenses the state’s agents, has been silent when it comes to providing guidance to licensees about advising sellers on the use of surveillance gear, according to Lesia Kudelka, a spokeswoman for the S.C. Department of Labor, Licensing and Regulation.

(She noted, however, that agents “have a duty to advise the seller or buyer to obtain expert advice on matters that are beyond the expertise of the licensee.”)

David Kent, owner of a buyers-only agency in Charleston, said he tells clients to assume that they’re being taped whenever they enter a seller’s house.

“Do all my clients remember that? Certainly not,” he added. “Once sellers know what someone’s willing to pay and how serious they are it certainly gives them the upper hand. There’s no reason to disclose stuff like that because you just don’t know.”

The North Carolina Real Estate Commission is a step ahead of its counterpart south of the border. The commission’s deputy legal counsel, Frederick Moreno, sent out a bulletin in 2014 warning agents that anyone caught secretly eavesdropping on the conversations of potential buyers could face criminal charges and lawsuits.

Moreno noted that sellers who snoop on buyers could be prosecuted under federal wiretapping law and, if convicted, would face a maximum of five years in prison. He also said buyers could sue sellers under North Carolina’s Electronic Surveillance Act, which allows for compensatory damages of $100 per day for each violation, punitive damages, litigation costs and attorneys’ fees.

“It’s the commission’s position that no audio recording should be happening,” Moreno said in an interview, “but video is permissible so long as it’s not violating someone’s privacy or decency.” In other words, leave the surveillance equipment out of the bathroom.

Moreno was unaware of any sellers ever being sued or arrested for spying on buyers. But he said the commission had received complaints from sellers who were concerned about what they saw buyers doing during showings — revealing that they had been snooping. Those complaints spurred him to investigate the legalities of the practice, which resulted in the aforementioned bulletin.

“We’ve also heard from brokers asking if their sellers can do this or if they have to put up a sign,” he added. “I didn’t find anything that you have to put somebody on notice that they’re on video.”

Bill Gifford, an attorney for the North Carolina Association of Realtors, a trade organization for agents, also advises members to tell their sellers to turn off any audio recording equipment during showings.

“Of course, if it’s happening how would you know about it?” he said.

While considering the issue, Hubbard, the USC professor, observed that we live in a “world of virtually ubiquitous surveillance,” but our ideas about privacy are lagging behind the increasingly prying eyes of technology. He said we can either assume the risk of being recorded all the time or establish privacy norms.

“Now that we know about this maybe buyers won’t talk in the house,” he said. “But isn’t that sad?”